City Manager Bill Workman this week introduced his proposed budget for the upcoming fiscal year, a budget that for the third consecutive year depends on employee wage concessions in order to meet a gaping deficit.
Workman’s proposed budget addresses a $3.8 million deficit largely through a proposed $2.8 million in savings that would be realized through an ongoing, six percent rollback in all city employee salaries. Workman praised employees for their collaboration, noting that city staff has been reduced from over 500 employees to 435 during the course of the economic recession.
“Our employees, in much smaller numbers, are highly effective,” Workman told the City Council on Tuesday night. “I’ll match our employees with any, in the private sector or the public sector, for their ability to get their work done.”
The City Manager said that it was his intention to balance the budget without laying off any employees, despite the slow pace of economic recovery statewide and locally. In order to do so, the budget proposes pulling $1 million from a special $2.5 million “set aside” fund the Council previously established in order to make increasingly large contributions to the California Public Employee Retirement System (CalPERS).
“This budget is about making tough choices,” Workman wrote in his budget message. “The economy’s downward spiral is taking with it municipal revenues expected to pay for City services.”
City revenues continue to be stagnant. Workman noted that both tax revenues and the city’s investment portfolio once again declined or remained flat.
“We’ve got less than a one percent increase in our property tax,” he said. “Our sales tax numbers are at the same level they were at 10 years ago…And finally, one of the really telling marks comes from our City Treasurer’s office – since 2007, our investments are down $1.3 million. So you start to add things up. These numbers are very telling as to the struggle we continue to have on the revenue side of the equation.”
The city is also facing cuts in federal and state revenues. Among the casualties are the federally funded Community Development Block Grant program, which President Obama’s budget slashed by $300 million, and the city’s Redevelopment Agency, which may cease to exist under current state proposals.
Workman’s budget, though transferring money from the CalPERS set-aside, also calls attention to the quickly escalating costs the city will face in meeting its share of employee retirement contributions. Because CalPERS investments have performed poorly, the city contribution will escalate from $10.2 million last year to $13.9 million by 2013. His budget suggests that the current system is “not sustainable” and will require restructuring; many California cities are moving to so-called “two-tier” retirement systems in which new hires receive less generous retirement packages.
“Local PERS reform has to be a priority or we will have to confront deep cuts in City jobs and services to pay our pension costs,” Workman wrote.
Councilman Pat Aust, a former fire chief and city employee for 42 years, agreed that the system is not sustainable but cautioned against aiming blame at employees for their retirement benefits.
“This was not stolen from anybody,” Aust said. “Nobody had a dirty picture of the Governor and bribed him into doing this. It is non-sustainable because PERS lost $100 billion a few years ago…That has nothing to do with employees. That has nothing to do with what any employee group negotiated. That has to do with the PERS board and the legislature allowing them to invest money in risky things.”
The Council must adopt a budget by the end of June and will conduct public hearings and receive commission output throughout the month. ER
